Category Archives: Law Notes

Is there a dead body in your future? The first sign of trouble on the construction project (Law & Order: Hard Hat files Part 1)

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fake dead bodyNobody dies in a construction dispute.  At least most of the time!

However, just as the usual “thunk-thunk” chord in Law & Order warns the viewer that something is awry, there are warning signs that your construction project may be under similar dire straights.  You should recognize these signs for what they are—early-warning lawsuit detection devices.  Signs that a lawsuit may be in your future include:

  1. The  “everything has gone wrong” situation.  This one is fairly big and obvious, but it bears mentioning.  If the project is delayed, over budget, and there are signs that the owner is looking for someone to take the fall, watch out.
  2. Much more subtle, but equally troubling, is the “start acting squirrely” syndrome.  If you have always had a good working relationship with the general contractor, but suddenly he is aloof, watch out.  If the owner is usually friendly and free with the flow of information, and he suddenly begins to clam up, be concerned.
  3. The “let’s document everything” protocol.  Now, as a lawyer, I feel duty bound to tell you that I think documenting everything is best management practice.  However, I do know that most normal folk don’t usually behave this way 24/7.  So, if you are on a project where a contractor likes to write letters to the file almost as much as he does change order requests, be leery.  Could be he just listens well to his lawyer’s proactive advice to document everything.  Or, could be he is preparing a case from the get-go to claim design failures, construction administration delays, and the like.  How to tell the difference?  Often, you can only go with your gut.  But take note—is Mr. Letter Writer documenting everything, or just items that might be considered “blame-able” ?
  4. The “I’m confused” RFI king.   Similar to #3 above, but more specific, the confused RFI king always seems to need clarification or further information about your design.  The requests for information flow so fast, you may have trouble responding timely.  This may be part of the plan.  Or, it may simply be a numbers game— either the contractor is asking RFIs to buy time on the project (often on a case with strong liquidated damages provisions), or he wants to later be able to point out the “excess number of RFIs” to prove “bad design.”

 Now that you’ve caught the whiff of trouble brewing, how do you stop it before the dead body smell takes up residence in your car?  Observe, document, and respond in kind.

If you are dealing with an RFI king, respond timely, and note when the RFI is asking for information that is readily available on the plans.  You might even consider keeping your own running log of questionable RFIs, so you can readily show your lawyer, and a future jury, that although there may have appeared to be a large number of RFIs on the project, the fact was that most of them (X percentage) were questions about something that the contractor should have already known if he had reviewed the plans.

If you have a “document everything” guy on your hands,  respond in kind.  You should be doing this anyhow, of course, but if you have someone that is especially prone to documenting everything, you need to be extra vigilant that he is not stating anything that is untruthful, that the documentation is complete, and that any time you get a document that doesn’t completely tell “the truth, the whole truth”, that you supplement it with your own documentation accordingly.

If you have a squirrely acting client, you might consider just politely confronting him to ask if anything is going on.  It could be something that has nothing to do with the project –  internal politics, personnel crises, etc.  In which case, you will find that out.  If there is something more sinister afoot, you can probably determine that as well.  The key here is to ask whoever you are (or had been) close to, and to ask them off the record, in person.  You can learn a whole lot through non-verbal body language.  If you find out, directly or indirectly, that there may be a claim afoot, then you can proceed accordingly.

If the project has gone to hell in a handbasket, there is not a whole lot you can do, other than to keep ensuring that you and your team are meeting all contract requirements.  Part of this should include documentation for the eventual lawsuit, if it comes to that.  You might also contact your lawyer or insurance company for assistance behind the scenes—something called “loss prevention”.  Remember, reporting the dead body is the first step to clearing the air.  It’s the cover up that usually gets folks in trouble.

Now it’s your turn.  Drop me a note or comment below to share your own techniques for recognizing possible lawsuits.  Next week in the series: the mechanics of being sued.  Stay tuned!

Photo (which is not of a *real* dead body) (c) garlandcannon via cc. 

 

Why Everything You Learned from Law & Order won’t help you win your professional malpractice case!

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Secret confession time here:  I *love* my Law & Order.  And while I’ve been known to suffer through SVU or, God forbid, Criminal Intent, it’s the original Law & Order (with uber-cool Detective Lennie Briscoe and the always wild-eyebrow of Jack McCoy) that really makes my day. 

Some clients wonder why I like to watch a legal show on television after a day of practicing law.  The answer is because the real world of law is nothing like that on shown on TV.  Things happen so fast and so amazingly on the show, it is fun way to wind down the day. 

On Law & Order, a subpoena is issued for bank documents, and, faster than you can say, “cha-chunk”, the documents are rolling through the office.  Court cases are wrapped up in neat tidy 60 minute packages (including time for discovering the real killer).  The lawyers get to ask unfair questions—make self-serving testimony and arguments to the jury—and it doesn’t matter, because they are on the side of truth, justice, and the American way.  Law & Order is many things, but an accurate representation of a court case, it is not.

What does this have to do with YOUR court case?  Everything.  Sure, you expect your construction case will be different from a “sexy” homicide case, but are you really prepared for just how different it will be?  How long it will take?  The delays, stalling, and prevarication the other side will be allowed?   Probably not.  Until now.

Over the next several weeks, I plan to walk you through a “typical” construction defect lawsuit—from the first initial phone call from the project manager that something might be amiss, to the dreaded yellow paperwork delivered by the Sheriff (if you are really lucky), the famed “courthouse steps” settlement discussions, and even the angst-producing knock on the jury room door announcing a verdict.  Stay tuned for Part 1 of the new series:  Law & Order: Hard Hat files, starting next Tuesday.  [And Dick Wolfe, if you steal my title for your next television series, please give me credit and a cut!] 

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Latent Defects: extending the statute of limitations (law note)

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surprisedAs we’ve previously discussed, the statute of limitations for construction claims in North Carolina is generally three years.  That is, once 3 years have passed, you are generally protected from any lawsuit filed after that time.

Does that mean that no lawsuit can be filed against you subsequent to that time?  No.  First, the statute of limitations is an affirmative defense, meaning that you must timely assert the defense as part of your response to the lawsuit.

Secondly, it is sometimes not apparent when the three year period begins to run.  Substantial completion or final completion?  What if your work is finished, but the project is not– does the three year period not start until project completion?  The issue of whether the statute of limitations has run is complex, and a mixture of law and fact questions.  See, Lord et al v. Customized Consulting Specialty, Inc. et al, 182 N.C. App. 635, 643 S.E.2d 28 (2007).

Finally, be aware of the hidden danger of hidden dangers. 

The three years does not start to run until it becomes obvious that there is damage stemming from your professional negligence.  The applicable statute states that the three years “shall not accrue until bodily harm to the claimant or physical damage to his property becomes apparent or ought reasonably to have become apparent to the claimant, whichever event first occurs.” N.C. Gen.Stat. § 1-52 (2005).

In other words, if there is a defect that is not readily observable and visual, the three years may not start to run until it becomes observable (e.g., through destructive testing, repair work, or renovation work).  This is what is known as a “latent defect”, and it can impose liability far beyond the initial 3 years.

Does the latent defect rule extend liability indefinitely?  No, it does not.  The statute of repose (6 years in NC; other states vary) will impose an absolute final date on real property improvements, after which no further liability can successfully be claimed.

Questions?  Drop me a comment, below.  Also, be sure to sign up for regular email updates and our free Construction Professional newsletter by entering your contact information on the top right of the homepage.

Photo credit: photo found on  (link no longer working)

 

Architects & Engineers – Are you committing a Class 2 misdemeanor without realizing it? (Tue Tip; law note)

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handcuffsBuried within the general contractor provisions of the North Carolina General Statutes is a little-known provision that can get architects and engineers in hot water.  If you recommend to a project owner anyone who is not properly licensed under the general contractor statute, you have committed a Class 2 misdemeanor.  Really!  Here is the pertinent language:

§ 87-13. Unauthorized practice of contracting; impersonating contractor; false certificate; giving false evidence to Board; penalties

Any person, firm, or corporation not being duly authorized who shall contract for or bid upon the construction of any of the projects or works enumerated in G.S. 87-1, without having first complied with the provisions hereof, or who shall attempt to practice general contracting in the State, except as provided for in this Article, and any person, firm, or corporation presenting or attempting to file as his own the licensed certificate of another or who shall give false or forged evidence of any kind to the Board or to any member thereof in maintaining a certificate of license or who falsely shall impersonate another or who shall use an expired or revoked certificate of license, and any architect or engineer who recommends to any project owner the award of a contract to anyone not properly licensed under this Article, shall be deemed guilty of a Class 2 misdemeanor. And the Board may, in its discretion, use its funds to defray the expense, legal or otherwise, in the prosecution of any violations of this Article.

However, there is also some relief in the same statute, which provides that:

No architect or engineer shall be guilty of a violation of this section if his recommendation to award a contract is made in reliance upon current written information received by him from the appropriate Contractor Licensing Board of this State which information erroneously indicates that the contractor being recommended for contract award is properly licensed.

Has this issue ever really been litigated?  Yes, it has.  While I cannot point to reported cases, I will tell you that I have had this become an issue – more than once – in my practice.  Each time, the design professional knew that the entity involved had been a licensed general contractor, but the entity had lost its contractor’s license before the particular project at issue.

Take-away:  Even if the general contractor is the largest and most well-known in the state, always, always, always check with the Licensing Board to confirm that a general contractor is in good standing before making any recommendation to a project owner.  Just in case.  Since Consider it two minutes well spent.

Questions, comments, experiences with this statute?  Share in the comments section of the blog.

Photo (c) Riki Maltese via CC

 

 

 

Something to Hang Your Hat On… (Limitation of Liability clauses) (law note)

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hat rackIn the past on this blog, I have pointed out the benefits of Limitations of Liability clauses.  These are the clauses that state that the most damages that your Firm can be responsible for is capped at a certain dollar amount or your contracted fee.

Do you have a limitations of liability clause in your professional services contract?  You should.  Best practice would be to have such a clause that limits damages against you to a set amount.  For example:

Engineer’s liability to Client for any and all injuries, claims, losses, expenses, damages or claim expenses arising out of this agreement, from any cause or causes, shall not exceed the total amount of $50,000 or the amount of Engineer’s fee, whichever is greater.

While best practice is to have such a provision, it is not always enforced.  In a case arising out of the Western District of North Carolina, the court noted that such provisions will not be enforced where the result would be unconscionable and “elicit a profound sense of injustice.” See  Performance Sales & Mktg., LLC v. Lowe’s Companies, Inc.,2010 WL 2294323 (W.D.N.C. June 4, 2010).

What does this mean in practical terms?  It means that you should endeavor to include a limitation of liability clause, but don’t necessarily think that if you have that you’ve capped your risk.  A court can always decide that the clause is unconscionable.  But, such a limitation is one more thing to “hang your hat on” if and when you find yourself staring down the barrel of litigation*.

* If, however, you are facing litigation, make sure you sign up for regular blog updates.  Starting next week, I am writing a new series on the anatomy of a construction lawsuit, so stick around! 

 

Photo:  (c) BabbNet via CC.